Govt may seek new bids for Bihar locomotive projects

The projects were announced by then railways minister Lalu Prasad in 2006 and were to be set up in partnership with private firms. Photo: Ramesh Pathania/Mint

New Delhi: The government may ask for new bids for contracts to manufacture diesel and electric railway engines, two controversial projects worth as much as Rs.60,000 crore that were first approved in 2006.

This decision has been taken after several failed attempts to revive the deals to establish two factories in Bihar, two railway ministry officials said, requesting anonymity.

Railway minister Pawan Kumar Bansal approved of a note to this effect on 26 April that has been forwarded to the cabinet secretariat, one of the two officials said. “The railway ministry has asked for the cancellation of the bidding process.”

The decision comes after serious disagreements between the railway ministry and the Planning Commission over 13 changes that the ministry sought to make to the bid documents that had been approved by the cabinet of ministers in 2009. India’s apex planning agency was against several of these changes, and on 22 April had asked the government to go ahead with the cabinet-approved bid documents.

The cabinet will have to give its consent before the present bidding process is cancelled.

The two projects—one to build electric locomotive engines and the other to build diesel ones—were announced by then railways minister Lalu Prasad in 2006. They were to be set up in partnership with private firms, with the railways holding a 26% stake in each. The total estimated value of the contracts for 800 electric engines and 1,000 diesel locomotives is about Rs.30,000 crore each, the second official said.

The electric locomotives are proposed to be manufactured at a factory in Madhepura and the diesel engines at Marhowrah, both in Bihar. The value of the projects is based on the price of the engines, design costs, and costs incurred towards establishing the proposed units.

“Bombardier is closely monitoring the development and post evaluation will bid for the project,” Harsh Dhingra, chief country representative, Bombardier Transportation India, said in an emailed response.

“This is a large and critical infrastructure project which has been in the pipeline for long,” a GE spokesperson said by email. “We would welcome any progress that leads to a successful PPP (public-private partnership).”

The latest decision to ask for new bids was taken following an informal meeting on 22 April attended by finance minister P. Chidambaram, Bansal and Planning Commission deputy chairman Montek Singh Ahluwalia.

Bansal and Ahluwalia could not be reached for comment despite repeated attempts. A railway ministry spokesperson declined to comment.

The cabinet first gave in-principle nod to the two projects in 2006, but only in 2009 did it finally approve the details. Since then, the two projects have courted controversy and allegations of corruption, and the opening of price bids for the electric engine project have been deferred at least eight times.

“There is immense competition among these companies, so these projects will never really be free of controversy,” said R. Sivadasan, a former financial commissioner at Indian Railways. “Instead of asking foreign companies to set up units in India, the government should get them to transfer technology, and produce the engines in India at railways’ own production units. The company that gives technology could be paid royalty for a few years, after which the railways should have the right to manufacture the engines without any constraints. Transfer of technology is the only way out.”